WE’RE ABOUT
Stage 2 Capital Update
6 September 2018
PROGRESS
1
IMPORTANT NOTICES
This document is produced for information only and not in connection with any specific or proposed offer (the “Offer”) of securities in Sirius Minerals Plc (the “Company”). No part of these results constitutes, or shall be taken to constitute,an invitation or inducement to invest in the Company or any other entity, andmust not be relied upon in any way in connection with any investment decision.
An investment in the Company or any of its subsidiaries (together, the “Group”) involves significant risks, and several risk factors, including, among others, the principal risks and uncertainties as set out on pages 48 to 52 of the Company’s 2017 annual report and other risks or uncertainties associated with the Group’s business, segments, developments, regulatory approvals, resources, management, financing and, more generally, general economic and business conditions, changes in commodity prices, changes in laws and regulations, taxes, fluctuations in currency exchange rates and other factors, could have a material negative impact on the Company or its subsidiaries' future performance, results and financial standing. This document should not be considered as the giving of investment advice by any member of the Group or any of their respective shareholders, directors, officers, agents, employees or advisers.
Any Securities offered for sale by the Company will not be registered under theU.S. Securities Act of 1933 (the “Securities Act”) and may only be offered and sold pursuant to an exemption from, or in a transaction not subject to, such registration requirements and applicable U.S. state securities laws.
Unless otherwise indicated, all sources for industry data and statistics are estimatesor forecasts contained in or derived from internal or industry sources believed bythe Company to be reliable. Industry data used throughout this document was obtained from independent experts, independent industry publications and other publicly-available information. Although we believe that these sources are reliable, they have not been independently verified, and we do not guarantee the accuracy and completeness of this information.
The information and opinions contained in this document are provided as at the date of this document and are subject to amendment without notice. In furnishing this document, no member of the Group undertakes or agrees to any obligationto provide the recipient with access to any additional information or to update this
document or to correct any inaccuracies in, or omissions from, this document which may become apparent.
This document contains certain forward-looking statements relating to the business, financial performance and results of the Group and/or the industry in which it operates. Forward-looking statements concern future circumstances and resultsand other statements that are not historical facts, sometimes identified by thewords “believes”, “expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-looking statements contained in this document, including assumptions, opinions and views of the Group or cited from third party sources are solely opinions and forecasts which are uncertain and subject to risks, including that the predictions, forecasts, projections and other forward-looking statements will not be achieved. Any recipient of this document should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. Such forward looking-statements speak only as of the date on which they are made.
No member of the Group or any of their respective affiliates or any such person’s officers, directors or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does any of the foregoing accept any responsibility for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the forecasted developments or undertakes any obligation to review, update or confirm any of them, or to release publicly any revisions to reflect events that occur due to any change in the Group’s estimates or to reflect circumstances that arise after the date of this document, except to the extent legally required.
Any statements (including targets, projections or expectations of financial performance) regarding the financial position of the Company, any of its subsidiaries or the Group or their results are not and do not constitute a profit forecast for any period, nor should any statements be interpreted to give any indication of the future results or financial position of the Company, any of its subsidiaries or the Group.
2
PROCUREMENT AND CAPITAL ESTIMATE UPDATE
Progress update
• Stage 2 financing procurement process nearing completion
− Tunnel contract executed with STRABAG
− MHF contract executed with Jacobs
• Stage 2 funding requirement expected to increase by US$400 – 600m
− Capital estimate increases largely driven by MTS costs
− Ultimate funding requirement will be determined by lender view of contingency and risk
• Project economics remain robust under revised capital estimates
− Project NPV of US$14.9bn² (previously US$15.4bn)
− EBITDA of US$1.4bn³ on contract case pricing
• Lender responses support stage 2 financing process subject to ongoing due diligence and revised financing plan1
Notes: 1) Subject to agreement with lenders following lender due diligence and including full lender assessment of contingency estimates, funding of deferred capital items and net operating cash flows. 2) Based on 20 Mtpacase. Production forecasts, pricing and operating costs are based on latest company estimates. Capital costs are based on the stage 2 estimate and Sirius estimates for expansion capital. All figures are nominal forecasts. Cash flows are unlevered and discounted at 10% WACC. 3) Projected indicative steady-state EBITDA assuming contract case pricing and 13 Mtpa steady state production.
Next Steps
Q4 ‘18
Q1 ‘19
• Finalise procurement plan, risk allocation and contingency assessment
• Convert advanced offtake volumes
• Revise financing plan
• Obtain bank commitment letters
• Financial close
3
LARGEST AND HIGHEST
GRADE
ROBUST
ECONOMICS
MARKET
SUPPORT
LOW COST, SIMPLE
MINING
2.66bnTonne polyhalite
resource
280mTonne reserve
88.4%Reserve grade
US$29.4/tOpex FOB Teeside¹
1 tonne ore ≈ 1 tonne product
Minimal processing
37kmFrom deep-water
harbour facility
US$14.9bn NPV20 Mtpa business case³
US$9.8bn NPV13 Mtpa business case³
DERISKED
EXECUTION
85.7% Resource grade
US$140-150/tFirst five year weighted
average price4
5.7 MtpaTake-or-pay
peak aggregate
volume4
Notes: 1) 10 Mtpa case cash operating costs excluding royalties and sustaining capital. 2) Indicative projected EBITDA in the year in which each respective production milestone is reach on a price assumption of US$100/t to US$200/t flat real and volume assumptions of 13 Mtpa and 20 Mtpa respectively. 3) Production forecasts, pricing and operating costs are based on latest company estimates. Capital costs are based on the stage 2 estimate and management estimates for expansion capital. Assumes base case pricing as defined on slide 24. All figures are nominal forecasts, inflated at 2% per annum. 4) 5.7 Mtpa as measured by taking the aggregate of the respective peak take or pay volumes under each agreement. US$140-150/t represents the weighted average price point of existing offtake agreements using independent third party fertilizer price forecasts (e.g. Argus FMB, CRU) expressed in nominal terms. 5) Capital costs excluding contingency
US$3.7bn5
Substantially procured
capital estimate
SIRIUS INVESTMENT PROPOSITION
HIGH
MARGIN
67 - 80%EBITDA margins²
US$0.9bn - 3.2bnEBITDA²
87%of capital costs procured
including signed and
pending contracts
67%of signed and pending capital costs on fixed rate
terms
Fully permitted Under construction
4
PROJECT UPDATE
5
DEVELOPMENT PLAN
MAIN
SHAFTS
Twin shafts
MINERAL TRANSPORT
SYSTEM
Single tunnel
MATERIAL
HANDLING FACILITY
Wilton
PORT
FACILITY
RBT
MINEJORC Resource: 2.66bn tonnes @ 85.7% Mining ratio: 1:1 JORC Reserve: 280m tonnes @ 88.4% Method: Continuous / D&B
Depth: c.1,600mDiameter: 6.75mCapacity: 13.4 MtpaWinder: 2 x Blair multi ropeOre discharge: -340m level
Length: 37kmDiameter: 4.9mCapacity: 20 MtpaDrives: 3 x TBMsOther infrastructure:• 66kV power supply
• Single flight conveyor
• Maintenance locomotive
Initial installed capacity: 10 MtpaExpansion footprint: 20 Mtpa
Deep water facility: 17m deep berthExport capacity: 10 MtpaAdditional capacity:20 Mtpa Bran Sands
Materials handling
facility - Wilton
Port facility
RBT
Lockwood BeckIntermediate shaft
Woodsmith Mine
✓ Procured ✓ Substantially procured ✓ Procured ✓ Substantially procured
Polyhalite seamUp to 70m thick
Drive 1Drive 3 Drive 2
6
SHAFT SINKING
Procurement
• Procurement complete
• Target price design and construct contract
• Contract entered into with DMC Mining Services, February 2018
• Encompasses all shafts at Woodsmith Mine and Lockwood Beck
Construction progress
• All site preparation complete
• Service shaft: Outer D-wall installed, excavation to -45m underway
• Production shaft: D-walling completion expected Q4 2018
• MTS shaft: Vertical Sinking Machine mobilised to site. Shaft sinking to -120m completion expected Q4 2018
• Lockwood Beck: Foreshaft perimeter piling to -20m underway. Grouting completion expected Q4 2018
1,600m
0
400m
800m
1,200m
7
Procurement
• Tunnel procurement complete
• Fit-out quote provided – T&Cs under negotiation
• Fixed unit rates design and construct and design, supply and install contracts
• Drive 1 contract entered into with STRABAG AG, March 2018
• Drive 2 and 3 contract entered into with STRABAG AG, September 2018 – costs of contract higher than previous estimates
Construction progress
• Drive 1 tunnel boring machine procured
• Drive 1 portal construction underway
MINERAL TRANSPORT SYSTEM
MTS variance drivers
Variance drivers 2016 2018
Tunnel diameter (ID) 4.3m 4.9m
Tunnel lining thickness 250mm 350mm
Advance rates (avgm/day)
25m 17m
Risk allocation n.a.More favourable to Sirius
Wilton Portal
Woodsmith Mine
Drive 3: 12km Drive 2: 12km Drive 1:12km
Lockwood Beck
360m
Redcar Mudstone
Drive 2:12kmDrive 3:12km
8
Procurement
• Procurement complete
• Target price EPC contract
• Contract entered into with Jacobs, September 2018
Construction progress
• Initial earthworks underway in preparation for platform construction
• R&D programme in association with Archer Daniels Midland ongoing with extensive granulation and binding test work
• MHF design has undergone extensive value engineering process
MATERIALS HANDLING FACILITY
CrushingRun of mine ore is
nominally crushed
below 50mm
GrindingCrushed ore
ground to 80%
passing 0.2mm
ScreeningPOLY4 granules
screened, oversize
and undersize
removed for
reprocessing
DryingPOLY4 granules
dried to final
moisture content
for storage and
delivery
GranulationBinder and water
added to polyhalite
powder and
granulated to form
POLY4 granule
MHF general arrangement
Granulation train• Crushing • HPGRs & classification• Granulation mixers• Rotary dryers & coating
Expansion footprint
MTS portal
ROM storage100kt total capacity
Finished product discharge point
Granulation process flow
9
PORT FACILITY
Procurement
• Port solution finalised
• Preferred contractor identified for port facilities
• Materials handling agreement signed July 2018 with RBT toprovide port and ship loading services for up to 10 Mtpa for aperiod of 10 years with the option to extend
• Long-term lease of land from RBT for storage facilities adjacentto port facilities
Scope
• Construction of overland conveyor deferred until operations
• Temporary truck and train solution to be implemented – providesopportunity to reduce capital costs associated with the port
Bran Sands
• RBT’s port facility located adjacent to the Company’s BranSands site
• Sirius has retained the right to develop its 20 Mtpa capacity,Bran Sands facility at a future date of its choosing
• 650m of frontage and capable of handling Panamax ships upto a capacity of 85,000 DWT
RBT Frontage
Storage,
reclaim and
screening Area
Bran Sands
Materials
Handling
Facility
10
REVISED OPERATING COST ESTIMATES
DFS operating cost estimates updated for current scope and rates
Key drivers of change in the operating cost estimate include:
- Updated mine plan
- Increase in power rates
- Reduction in starch binder costs following signing of ADM supply agreement
- Reduction in port outsourcing charges and inclusion of RBT port handling charges
Notes: 1) Operating costs are real life of mine cost and represent latest company estimates and exclude royalties and sustaining capital and are presented using an exchange rate of 1.33 USDGBP. 2) Mining costs include costs relating to mining equipment leasing. 3) Port storage and loading costs include RBT handling rates.
12.3
5.4
8.2
3.0 0.4
Mining
Minerals transfer
MHF processing
Storage and loading
Other
US$29.4
10.3
5.1
8.7
3.00.2
10 Mtpa 20 Mtpa
US$27.4
2016 estimate US$32.6/t US$27.6/t
Cash operating costs (US$/t FOB Teesside)
11
Detail Stage 2 Scope Expansion Phases
Production capacity 10 Mtpa 13 Mtpa 20 Mtpa
Timing1 2024 2026 2029
Source of funds2 Stage 2 financingOperating cashflow
(US$0.4bn)Operating cashflow
(US$1.2bn)
Scope
Woodsmith Mine
• Mine shafts(13 Mtpa)• Ventilation • Mine development
• Expansion of mining fleet
• Ventilation shaft • Third winder• Expansion of mining fleet
MTS• MTS tunnel• Conveyor (20 Mtpa)
• No change required • No change required
MHF• Granulation (7 Mtpa)• Coarse product (3 Mtpa)
• Additional granulation capacity (to 13 Mtpa)
• Additional granulation capacity (to 20 Mtpa)
Port Facilities
• Overland conveyor deferred to early production
• Temporary truck and train solution• Storage and outloading for 2
products (~250 kt)• RBT port handling (10 Mtpa)
• New berth development adjacent to RBT facility
• Additional storage
• Additional storage
REVISED PROJECT SCOPE – PHASES OF GROWTH
Notes: 1) Timing represents year in which peak production is expected based on Company forecasts. 2) Expansion capital amounts represent the latest company estimates for incremental capital requirements for expansion to 13 Mtpa and 20 Mtpa production capacity respectively and are presented on a real basis.
12
PROCUREMENT STATUS
Project Area Shafts MTS MHF Port facilities
Scope
Mine shaft
development
(shaft sinking and mine
development)
• Tunnel development (three TBM drives, caverns
and Wilton portal)
• Tunnel fit-out (conveyor & 66kV cable
installation)
Materials Handling
Facility
Wharf, outload circuit,
and product storage
Main Contractor TBA
Contract typeTarget price
design & construct • Fixed unit rates design & construct EPCTarget price
EPCTBA
Ancillary
contracts
• Woodsmith Mine site
preparation and
enabling works
• Foreshaft
development
• Ventilation and
mining equipment
• Lockwood Beck site preparation and enabling
works
• Foreshaft development
• Wilton Mine site
enabling works
(STRABAG)
• Utilities and
connections
• Site enabling works
• Equipment supply
and design
• RBT materials
handling agreement
Status
• Awarded Feb 2018
• Site preparation
complete
• Foreshaft
development well
progressed
• Drive 1 awarded Mar 2018
• Drive 2 & 3 awarded Sep 2018
• Fit out quotes provided – T&Cs under
negotiation
• Site preparation and portal construction
underway
• Awarded Sep 2018
• Materials handling
agreement signed
Jul 2018
• Port procurement
substantially
complete
13
Estimated
13%
Procured
87%
Fixed
Rates
67%
Target
Price
29%
Reimbursable
4%
Procured capital costs by contract type
PROCUREMENT CONTRACTS
• Procurement for initial development substantially complete
• Stage 2 estimate derived from contractor pricing for signed and pending contracts
• Substantial fixed price component including:
− Long lead equipment
− STRABAG pricing for the MTS
− Other fixed rate contracts relating to the mine development
• DMC and Jacobs contracts are target price
Notes: 1) % of capital cost re-estimate excluding contingency
Area Procured Estimated
Mine development • Site preparation
• Shaft development
• Mining equipment
• Mining development
• Buildings
MTS • Tunnel
• Conveyor/ 66kV supply
• Fit-out
MHF • MHF including equipment • Site preparation
Port • Site preparation
• Shiploaders
• Storage and outloading
• Utilities, controls, road and rail
facilities
Other • Costs incurred
• Land and mineral rights
• Other owners costs
% of capital cost re-estimate procured1
14
OWNERS TEAM IN PLACE AND MANAGING INTERFACES
Owners Team
• Senior leadership team well established
• ~100 person team in place
• Team supported by specialist consultants in key areas
Execution Strategy
• Manage contractors and interfaces directly where most efficient
• Minehead – initial work managed directly and then rolled into DMC
• Demonstrated track record of effective execution through initial construction phase
Northern PowerHV power supply
BreedonsConcrete supply
Bauer Diaphragm walling
CareysForeshaft development
CollinsEarthworks
North MidlandSite infrastructure (complete)
Premier modularSite office (complete)
15
REVISED CAPITAL ESTIMATE
Notes: 1) Nov-16 capital costs represent the total capital costs anticipated at the time of the Stage 1 financing and include US$125m associated with mobile mining equipment expected to be leased. 2) Sep-18 capital costs represent the stage 2 re-estimate. Estimates are presented in USD translated from the underlying currency estimates at June 2018 exchange rates. 3) Includes contingency, escalation, and separate allowances for capital spares and freight. Nov 2016 includes escalation and allowances of US$127m, September 2018 includes escalation and allowances of US$130m
• The company engaged a third party consultant to assist in the preparation of a revised capital cost estimate and risk assessment
• The estimate was compiled on the basis of signed contracts, tenders or quotations
• Contracts prices have been reviewed and allocated to the relevant component of the work breakdown structure
Capital Costs (US$m) Nov 20161 Sep 20182 Change Comment
Mine development 1,238 1,079 (159) • MTS Caverns to be completed by MTS tunnelling contractor
MTS 858 1,461 603
• Scope includes caverns• Revised capital costs to reflect fixed rates and risk transfer to
the tunneling contractor
MHF and Port 641 538 (103)• Overland conveyor deferred until commencement of
operations
Other infrastructure and facilities
121 258 137• Sep 2018 estimate includes general site infrastructure previously
included in other areas (including construction power)
Owners costs 280 371 91 • Revised to reflect changes to implementation plan
Contingency, escalation and allowances3
536 463 (73)• Re-calculation based on progress and design work undertaken
to date
Total 3,673 4,169 496
16
Contingency re-estimated based on the revised capital estimate and best practice approach:
Risks identification and impact evaluation
• A detailed assessment of project risks was undertaken by Sirius, taking into account all available technical information and risk mitigation measures
• The impact and probability of overrun for specific risks was identified and ranges applied for each area of the estimate
Probabilistic modelling
• Monte Carlo simulations were performed by a third party consultant resulting a probability weighted distribution of cost outcomes for the overall project
• Sirius has included a conservative contingency provision at a P65
• Escalation allowances were calculated based on an assessment of scheduled costs
RISK AND CONTINGENCY
Notes: 1) Distribution is for illustration purposes and does not represent the actual distribution of the contingency. Includes contingency, escalation, and separate allowances for capital spares and freight as per slide 15.
Fre
qu
en
cy o
f
ou
tco
me
s
P50US$370m
P65US$463m
P80US$580m¹
Lower probability of overruns
Stage 2 Financing considerations
• Significantly more certainty over project risks compared to Stage 1 following the completion of;
− extensive ground investigation
− design and engineering; and
− agreement of contractual risk allocation through procurement
• Lenders will form a view of the required contingency based on ongoing due diligence
17
STAGE 2 FUNDING REQUIREMENT
Notes: 1) Stage 2 Capital of US$3.0bn represents total requirement for stage 2 senior debt anticipated by the financing plan presented to prospective lenders in H1 2018 and assumes the Nov-16 capital costs. 2) Sep-18 Stage 2 Capital reflects the total funding requirement following potential adjustments anticipated by the company associated with changes to the stage 2 financing plan.
Financing
costs
Total
Capital
Costs
US$ Billions • ~US$0.4 – 0.6bn expected increase in Stage 2 capital requirement
• Risk allocation to be agreed with lenders and determined by;
− Contingency
− Project scope/ funding of deferred capital items
− Net operating cash flows
− Market interest rates
0.9
0.5
0.2(0.1)
(0.1)
3.4
Capital costs
Netoperatingcashflow
Stage 2 capital (Sep-18)
Risk allocation
Stage 2capital(Sep-18)
Equipmentleases
Stage 1capital
3.7
4.6
Financing costs
(1.2)
Total capital
requirement
3.0
3.6
Stage 2capital
(0.3)
Original Stage 2 Requirement1 Revised Stage 2 Requirement2 Capital requirement range
(Nov-16)
18
PROJECT SCHEDULE
FIRST POLYHALITE
10 MTPA RATEPROJECT MILESTONES
AND KEY DATES
CONSTRUCTION AND RAMP UP
WOODSMITH MINE MAIN SHAFT SINKING
MINERAL TRANSPORT SYSTEM
MATERIALS HANDLING FACILITY
PORT FACILITY
CONSTRUCTION & COMMISSIONING
CONSTRUCTION & COMMISSIONING
MTS CONSTRUCTION FIT OUT
MAIN SHAFT SINK FIT OUT
RAMP UP & COMPLETIONCONSTRUCTION
FORESHAFT CONSTRUCTION
STAGE 2 FINANCING CLOSE
OVERLAND CONVEYOR
19
SALES AND MARKETING
20
• 5.7 Mtpa1 Take or Pay supply agreements in place
• 3 Mtpa of Take or Pay supply agreements for Brazil and Western-Europe very well advanced
• Initial 10 Mtpa diversified across 3 of the 5 largest fertilizer markets
1.552
Mtpa
0.552
Mtpa
0.351
Mtpa0.752
Mtpa
North
America
15%
Brazil /
Western Europe
30%
Other LATAM
6%Africa
3%
China
25%
SE Asia
8%
RoW
13%3
Mtpa
Selection of Commercial Partners:
Notes: 1) 5.7 Mtpa as measured by taking the aggregate of the respective peak take or pay volumes under each agreement 2) Measured by taking the peak take or pay volume under the respective agreements.
GLOBAL PRODUCT DISTRIBUTION PLATFORM
2.51
Mtpa
21
0
2
4
6
8
10
12
Planning
Approval
Stage 1
financing
Current Current + well
advanced
Mtp
a
Contracts Options
0
2
4
6
8
10
12
1 2 3 4 5 6 7 8 9 10
Mtp
a
Production years
Contract options and assumed extensions
Contracted + well advanced
DEMONSTRATED TRACK RECORD OF MARKETING POLY4
Historical marketing progress1 Sales profile3
Notes: 1) Contracted volumes and options per annum measured by taking the peak aggregate take or pay volume under each agreement. 2) Well advanced expected volumes at 3 Mtpa by taking the peak
aggregate of the expected take or pay volume. 3) Sales profile represents the contracted and well advanced volumes and the contract options and assumed extensions.
2
22
• Supply agreements expected to deliver US$140-150/t1 FOB over first five years of production
• Bank case assumes US$129/t2 over the same timeframe
• All pricing mechanisms are linked to underlying nutrient value and product benchmarks (MOP, SOP, sulphur, magnesium, etc.)
• Significant long term upside potential from achieving full nutrient value pricing
• Robust downside protection and attractive margins through the commodity cycle
Notes: 1) Represents the weighted average price point of existing supply agreements using independent third party fertilizer price forecasts (e.g. Argus FMB, CRU) expressed in nominal terms. 2) Represents the weighted
average price point of existing supply agreements using third party forecasts expressed in nominal terms. 3) Implied POLY4 value based on the nutrient value for low chloride potassium, sulphur and magnesium in Europe. 4)
Represents the weighted average price point of existing supply agreements as measured by taking the peak aggregate take or pay volume under each agreement with the exception of the 2025 case which represents the
weighted average contract price in that respective year. 5) Based on August 2018 pricing. 6) Based on 2021 price forecasts. 7) Bank case based on third party consultant estimates commissioned by the Bank Group. 8) MOP
CFR Brazil historical and forecasted price points by independent third party (e.g. Argus FMB). 9) SOP NW Europe Price for Bulk FOB historical and forecasted price points by independent third party (e.g. Argus FMB, CRU).
0
50
100
150
200
250
High
since 2010
Low
since 2010
Current First Polyhalite 2025 Bank case
2025
Implied POLY4 Value Contract terms
MOP8 US$555/t US$219/t US$332/t US$311/t US$384/t US$256/t
SOP9 US$632/t US$423/t US$501/t US$455/t US$450/t US$484/t
US$/t
5 7
3
4
Potassium benchmark pricing
ATTRACTIVE PRICING THROUGH THE CYCLE
6
POLY4 pricing scenarios
23
VALUE
24
Pricing sensitivities
1) US$100/t flat real
2) Contract Case: contracted and uncontracted volumes sold at prices equal to current contract methodologies
3) Base Case: contracted volumes sold at offtake contract prices, uncontracted volumes sold at a discount to nutrient value ramping up to full nutrient value in year 5
4) US$200/t flat real
NPV
(US$m)Capex
Price (10%) - 10% 20%
US$100/t 2,599 2,256 1,912 1,569
Contract
Case6,672 6,328 5,985 5,641
Base
Case10,109 9,766 9,422 9,079
US$200/t 11,135 10,791 10,448 10,104
ROBUST ECONOMICS
Notes: Production forecasts, pricing and operating costs are based on latest company estimates. Capital costs are based on the stage 2 estimate and management estimates for expansion capital. All figures are nominal
forecasts. Cash flows are unlevered and discounted at 10% WACC. All figures are nominal forecasts, inflated at 2% per annum. NPV is calculated as at 31 December 2018 value date. Capex is remaining capital expenditure
forecast from 31 December 2018.
2018 NPV sensitivity – 20 Mtpa2018 NPV sensitivity – 13 Mtpa
NPV
(US$m)Capex
Price (10%) - 10% 20%
US$100/t 4,501 4,093 3,685 3,277
Contract
Case10,365 9,957 9,549 9,141
Base
Case15,307 14,899 14,491 14,083
US$200/t 16,386 15,978 15,570 15,162
25
BUILDING THE HIGHEST MARGIN FERTILIZER BUSINESS
EBITDA sensitivity¹
Notes: 1) EBITDA as at the year in which each respective production milestone is reached, presented on a real basis. Contract Case: contracted and uncontracted volumes sold at prices equal to current contract methodologies, Base Case: contracted volumes sold at offtake contract prices, uncontracted volumes sold at a discount to nutrient value ramping up to full nutrient value in year 5 2) EBITDA values are FY18 estimates with the exception of Sirius, which is indicative projected steady-state EBITDA. Revenue and operating costs based on latest company estimates. All figures are nominal forecasts. Source: Factset 3) Range calculated as steady state EBITDA estimate on a range of pricing assumptions (US$100/t to US$200/t flat (real)) and volume assumptions (13 Mtpa to 20 Mtpa)
Nutrien
SQM
Yara
Mosaic
CF Industries
ICLK+S
PhosAgro
OCI
Acron
Compass
Minerals
Intrepid
-
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
- 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
EB
ITD
A M
arg
in (
%)
EBITDA (US$m)1
US$0.5bn
US$5bn US$15bn
Selling
Price US$/t
EBITDA %
13 Mtpa
EBITDA
13 Mtpa
EBITDA %
20 Mtpa
EBITDA
20 Mtpa
US$100/t 67% US$0.9bn 67% US$1.3bn
Contract
Case74% US$1.4bn 76% US$2.3bn
Base
Case78% US$1.8bn 80% US$3.1bn
US$200/t 79% US$2.1bn 80% US$3.2bn
Sector
Avg.25% US$1.4bn
Potential of Sirius³
Indicative peer positioning²
26
SIGNIFICANT VALUE CREATION OVER TIME
Notes: Mine plan, pricing and operating costs are based on latest company estimates. Capital costs are based on the stage 2 estimate. Assumes Company base case pricing. All figures are nominal forecasts.
NPV progression - 13 Mtpa and 20 Mtpa (US$m)
US$9,766
US$15,422
US$22,634
US$25,366
US$27,373
US$14,899
US$22,257
US$31,733
US$36,599
US$43,258
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2018 2019 2020 2021
First
Polyhalite
2022 2023 2024
10Mtpa
2025 2026
13Mtpa
2027 2028 2029
20Mtpa
US$m
13Mtpa 20Mtpa
Existing market capitalisation
27
FINANCING PLAN
28
Re
po
nse
s
✓ All key stakeholders remain engaged in the process
✓ Bank responses support ~US$1.5bn commercial tranche, subject to ongoing due diligence and revised financing plan
Sta
tus
• Project procurement substantially complete for major packages and capital costs defined
• Lenders technical due diligence ongoing, including review of capital contingency
• Commercial review of construction contracts ongoing
Are
as
of
foc
us • Technical construction risk and contingency
• Construction risk allocation and transfer to
construction counterparties
• Contract interfaces and project implementation plan
• Offtake counterparty credit quality
STAGE 2 DEBT FINANCING PROCESS PROGRESSING WELL
Next Steps
Q4 ‘18
Q1 ‘19
• Finalise procurement plan, risk allocation and contingency assessment
• Convert advanced offtake volumes
• Revise financing plan
• Obtain bank commitment letters
• Financial close
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UNDERLYING VALUE SUPPORTS FINANCING PLAN
Strategic Drivers
Potential sources of
capital
• The greatest driver of value for the company is successful project delivery
• The company believes a US$3bn senior debt financing is the appropriate level of debt
and will not seek to increase this amount
• Incremental capital raisings must complement and ideally enhance the stage 2 debt
financing
• It is intended that all sources of stage 2 capital (senior debt, other) will be raised
conditional on the basis that the project has a complete funding package
• Strategic partner – to provide capital at either the asset or project level. Would also
enhance perceived execution risk for key stakeholders
• Completion support – Potential for stakeholders or financial investors to provide
contingent funding for the purposes of mitigating cost overrun risk. Will pursue the most
efficient and cost-effective capital structure
• Structured capital – Alternative sources of capital including subordinated debt and
leasing providers
• Capital markets – Convertible notes, new equity where the value proposition is
appropriate for all capital providers (existing and new)